INTC Says Q2 On Track; Talks Up Foundry Ability; Atom Lag Reduced

By Tiernan Ray

Intel’s (INTC) annual investor day is ongoing. The company reiterated its Q2 outlook.

CFO Stacy Smith said the company was on track to see revenue above $50 billion this year.

Just before Smith, CEO Paul Otellini spoke.

Otellini made a push for the company’s unique ability to make money off the tablet and smartphone race even though it is regarded as having little standing in those markets.

Otellini outlined what could be seen as an improvement in Intel’s mobile chip roadmap, throwing up a slide describing the timeline and roadmap for Intel’s “Atom” chips for mobile devices. You can see the image in the full deck of slides Intel has posted. It’s slide # 20.

The slide showed a progression of Atom from current 32-nanometer process technology to 14-nanometer technology, with an estimate of around 3 years for the full progression, or 36 months.

Otellini showed off a 3-year roadmap to move its “Atom” mobile processor to 14-nanometer technology, suggesting a faster ramp for the chip than in past

Intel is expected to have a version of Atom in a 32 nanometer process, under the “Medfield,” line, notes Thomas Halfhill with Microprocessor Report. That would correspond to the “Saltwell” chip in the slide, which is expected later this year. Halfhill expects a 22-nanometer chip, which would be the part Intel labels “Silvermont,” and a 14-nanometer part, which it code-names “Airmont.”

Intel has historically had a 2-year lag between its PC and server processors and its Atom chips, says Halfhill, meaning how long it takes for Atom chips to be made in the latest technology after PC and server have already been moved to that technology.

The schedule as presented today would represent only a one-year lag, cutting Intel’s mobile lag time in half, says Halfhill. The slide would imply an Atom chip in 22 nanometer, Silvermount, in Q4 of next year, says Halfhill. That’s Intel’s classic advantage, he says, the ability to speed up process technology.

Back to Otellini: He suggested Intel is already making most of the profit in mobile given the ramp in servers using Intel chips to power services for the devices. And Otellini even alluded to the prospect of providing chip fabrication facilities for Apple (AAPL) and other chip designers, something that has been speculated about quite a bit of late.

Otellini talked about growth in the company’s data-center oriented “Xeon” chips, which should be a $20 billion a year businesses “within 5 years,” up from $10 billion this year, for a compounded annual growth rate in revenue from last year through 2015 of 15%. It’s not just high-performance computing, said Otellini, but also storage and other applications.

“We’re making far more margin than any silicon vendor is selling into those devices. The money is in the infrastructure.”

Otellini said there’s three places where people like Intel are going to get paid: Value for making silicon, value for chip feature sets, and value for high-performance servers, storage and networking.

While Intel gets paid on all three aspects in the current PC market, he suggested the company would also get paid eventually for all three in the tablet and smartphone market.

“Even good old Apple has to go to a foundry. They’re paying Samsung, and that value is not accruing to Apple.”

“If you look at the profitability around the smartphone chips, it’s mostly going to the foundry guys,” said Otellini, alluding to contract chip manufacturers such as Taiwan Semiconductor Manufacturing (TSM).

“The people making the SOCs are making substantially less money. As we bring our architecture and the benefits of our transistor technology into [tablets and smartphones] we believe we can be paid for all three. It’s not just about the instruction set, it’s about security as well as other things,” in the chip, said Otellini.

Intel showed off reference designs for 7-inch and 10-inch tablets in presentations later on in the day, saying it intended to help partners make both.

Intel shares are now down 40 cents, or 1.7%, at $23.24.

Intel CEO Otellini said mobile devices increase server demand

Otellini said Intel will be able to extract value from tablets and smartphones in chip making, chip feature sets, and data-center computing

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There are 6 comments

MAY 17, 2011 12:26 P.M.

Joe wrote:

In the next 36 months? Or is it more like the next 3-6 months?

MAY 17, 2011 12:49 P.M.

Henry 3 Dogg wrote:

Based on Intel's logic, looks like the people making most of the money on smartphones are the power companies.

MAY 17, 2011 12:56 P.M.

techy46 wrote:

“Atom” chips for mobile devices would come to market in “the next 36 months.”

I hope they meant 3-6 months?

MAY 17, 2011 1:01 P.M.

techy46 wrote:

I don't see where he alluded to being a foundry for Apple unless Apple switches to Atoms? Sure, Apple has to use a foundry but why would Intel make chips with ARM cores when they would cannabile Atoms?

MAY 17, 2011 1:05 P.M.

iphone rules wrote:

whoa! 36 months!

MAY 17, 2011 1:19 P.M.

Tiernan Ray wrote:

Folks: It's 36 months from now for the full progression to 14-nanometer Atom chips, but the good news is that it appears to be an improvement in the overall lag between PC chips and Atom chips, for Intel. See the update.

About Tech Trader Daily

Tech Trader Daily is a blog on technology investing written by Barron’s veteran Tiernan Ray. The blog provides news, analysis and original reporting on events important to investors in software, hardware, the Internet, telecommunications and related fields. Comments and tips can be sent to: techtraderdaily@barrons.com.